Why are premiums charged?
One of OIRM's strategic initiatives is to implement policies and procedures created by Office of the President Risk Management. Office of the President is committed to equitably allocate the cost of liability and property programs to University campuses and medical centers. An equitable allocation considers the size (FTE) of each location, as well as the number of claims (frequency), and how expensive each claim is (severity). Office of the President currently uses this allocation method to charge campuses and medical centers for Workers' Compensation and Liability Programs. Other program premiums are either charged directly to user departments, or are currently not being assessed but funded at the Office of the President.
Why are surcharges and deductibles assessed in addition to premiums?
OIRM assesses an administrative surcharge to campus units to fund claim administration, program administration and loss intervention activities for Workers' Compensation and Liability Programs. For most programs, departments are usually assessed deductibles for individual claims. Some deductibles are mandated by Office of the President, while others are established at the campus level.
What is an "experience-rated cost allocation?"
Experience rating is an actuarial formula where each cost center is assessed rates higher or lower than the average (base) rate, depending on whether the frequency and severity of claims occurring within the cost center are higher or lower than the average frequency and severity of injuries for all cost centers. OIRM currently utilizes experience rating to allocate Liability and Workers' Compensation Program premiums.
How do I budget for premiums and deductibles?
Because of variances in claims experience, premiums for Liability and Workers' Compensation Programs vary from year to year. OIRM distributes premium information for these programs in February of each year. For programs such as Auto Property Damage and Deductible Buy-Down, premiums are relatively stable from year to year.
Deductible amounts remain constant, so departments should consider how a deductible or series of deductibles would impact cash reserves should a large loss or series of small losses occur. Through Loss Control and Training Programs, OIRM can assist you in performing a risk analysis of your operation to more accurately forecast premiums and deductibles.